Titan's recraft strategy pays off, sees watch business return to growth

Until two years ago, time was ticking against Titan. Its watch business was going through a low phase of growth. In 2016, the company posted a mere 3-4 per cent growth in the business.

This slow growth was a culmination of several factors, including some beyond its control. The consumers of the day had stopped buying watches for gifting purposes and were preferring other options such as perfumes and bags. For Titan, about 55 per cent of its watch sales were driven by customers who were buying them as a gifting option, and that suddenly dropped to around 30 per cent due to fierce competition from other accessory segments. International brands were also playing the exclusive made for India customers card and a new segment of smart watches was disrupting the sector driven by electronic giants such as Apple, Samsung and LG. Apart from these, the emergence of e-commerce as a marketing channel was also hurting the business.

That was the time Titan decided to adopt a ‘recraft’ strategy — that, after a good two years, seems to be paying off. As the name suggests, the company crafted a new strategy around its people, products and distribution. “This ‘recraft’ strategy has turned around the business and got us back to the days of double-digit growth,” says Ravi Kant, Chief executive officer of watches and accessories, Titan Company Ltd. In FY18, the watches business, which accounts for around 17 per cent of Titan’s overall business recorded an income of Rs 21.26 billion for FY18, registering a much higher growth than the past few years. The growth of 3.6 per cent being reported, appears muted due to the effect of GST on top line. Titan Company Ltd reported an income of Rs 156.5 billion for the year ended March 2018. The same trend continued in the June quarter of FY19 when the watch business grew at a healthy rate of 14.9 per cent on the back of good growth in modern retail formats as well as higher primary sales to the trade channel in anticipation of the Titan activation. The company continues to be the undisputed market leader with about 50 per cent share in the organised watch market.

Time is of the essence

• The wristwatch market in India has grown from Rs 34 billion in FY’ 2008 to Rs 65 billion in FY 2013. The market can be classified into three categories — the mass segment with watches priced lower than Rs 1,000; the mid-priced segment with watches priced between Rs 1,000 and Rs 10,000. The premium watch segment with watches retailing at Rs 10,000-plus
   
• The mass segment of watches is the biggest chunk of the market in terms of volume. In terms of value, the mass and the mid-priced segments contribute about 37-38 per cent to the total wristwatch market. The rest is contributed by the premium segment accounting for 25 per cent of the wristwatch industry in India
   

Source: Ken Research, industry estimates

The company, as part of the revival strategy, rolled out a voluntary retirement scheme in 2016 with the aim to reduce the headcount and improve productivity. Under this, about 150 people took retirement which saved the company about Rs 200 million in employee cost over two years.

Titan also entered the smart watch segment in a significant way to stay relevant with the changing preferences of the new customer. “We looked at this category in a different way. The smartphone technology of phone manufacturers focussed on the touchscreen; we started off making good-looking smart watches,” says Kant. The company came up with a smart watch that incorporated the dual movement of analog and digital. So, if the battery runs out, it still indicates time instead of a blank screen like some other smart watches. In two years, Titan has now become a key player in the segment with around 10 per cent of its watch revenue generated from this segment.

As the smartwatch market grows at a robust 25-30 per cent, Titan is eyeing a bigger pie of this segment. In order to achieve this, the company plans to launch five new smart watches in the current financial year. It has already introduced Titan WE, a watch especially designed for women, and Sonata Act, a safety watch at an affordable price of around Rs 2,000.

That said, it still has a long way to go in the segment. According to market tracker Counterpoint Research, in the second quarter of 2018, Apple Watches made up 35 per cent of the total smartwatches sold in India, followed by San Francisco-based FitBit with an 18 per cent market share. Chaebol Samsung was a close third with about 14 per cent market share.

Its first fitness band under the Fastrack youth brand, Reflex, has also been a success. The company will be coming up with two new variants of the product in the current financial year which will have features such as clicking photos and locating lost phones, at a reasonable price. In any case, the overall smartwatch market in India is still very small — about 1 per cent of the size worldwide. Last year, says Counterpoint, 34 million smartwatches were shipped globally, of which only 260,000 came to India.

Titan also beefed up its distribution muscle. Today, Titan watches are sold through 10,000 outlets across sales channels including e-commerce and offers comprehensive post sales service to customers, irrespective of where they buy the product from. Titan has also entered a strategic partnership with about 10 e-commerce majors such as Flipkart, Amazon, Myntra and Jabong with 9 per cent of its business coming from such platforms. It has also entered the US market through an exclusive partnership with Amazon.com.

The company has 743 service centres across India to handle all kinds of watch repairs and over 5,000 trained dealers to take care of minor repairs. These service centre timings are aligned to retail outlet timings and about 80 per cent of the watches are repaired the same day.

Time again seems to be on Titan’s side.